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Hard Brexit: What Would It Mean For Irish Agri-Food Producers?

Especially since Theresa May's Tory conference speech (2 October 2016), a "hard Brexit" by April 2019 seems more likely. What would this mean for Irish agri-food producers?

First, the UK would trade under the WTO's "most favoured nation" (or MFN) rule. This rule aims to create a level playing field for global trade. It is the basis for EU trade with US, Japan, China and Russia today.

With one important exception, the WTO's MFN rule requires every WTO member to treat all members equally. So, in principle, the UK could not apply different tariffs to Irish agri-food products and products from low cost countries (eg Brazil, Argentina, and New Zealand).

An important exception applies where two or more WTO members agree preferential trade terms in a free trade agreement or FTA. Under WTO rules, PTA's must cover "substantially all trade." You can't have an FTA in respect of one or two lines of commerce only.

Second, it means tariff duties could apply. Most Irish agri-food exports are commodity products (eg beef, pigmeat, and butter). Tariff duties on these types of agricultural products can be high. In the nearby table, we combined CSO export and UK import figures to calculate the bound tariffs for Ireland's top 10 agri-food exports to UK (by value) in 2015 terms. It shows that, for some products, tariff duties again on the basis of bound tariffs could be up to 70%.

To adopt a cheap food policy (as Ms May has hinted), the UK could do one of two things. The first would be for the UK to declare itself a low- or no-tariff country, like Singapore. If this happens, Irish producers and producers from low cost countries (eg Brazil, Australia, New Zealand, and Argentina) would pay the same UK tariffs.

The alternative would be for the UK to put in place FTAs with low cost countries. In that case, Irish producers could pay higher tariffs to access the UK market than producers from those countries.

To plan on the basis that the UK will be out of the Single Market by April 2019 seems prudent, even if a worst case scenario. But access to the UK market isn't the only challenge.

Brexit could sever Ireland's main transshipment route to continental Europe. The nearby maps show the impact by reference to the EU's hallowed "TENs-T" (for transEurope transport networks) core network.

Exports to mainland EU would need to transit an area outside the common customs area. Expect increased red tape for customs clearance procedures – though few can predict how complicated these may be. Inconvenient rules of origin could also delay and increase logistic costs.

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